Unlike Yahoo!‘s (YHOO) Q2call last week, delivered in a somewhat slick newscast style, the Netflix stream looked like a webcam-based videoconference, with each participant in a close up, against drab backgrounds, and apparently in separate locations.

Julia Boorstin of CNBC on the Q2 Q&A.

Reed Hastings and CFO David Wells start the call off by passing the Q&A to Julia Boorstin of CNBC. The first question is complaints that the call actually would reduce investors’ ability to have an open exchange with the company. Hastings replied that he thought the question should be held until the end of the call.

Rich Greenfield of BTIG Research on the Q2 Q&A.

Rich Greenfield, a bull on the stock at BTIG Research, was next, asking Hastings why it was that net additions didn’t reach the top end of the company’s forecast. He said that the company intended the forecast range to allow the company to achieve the midpoint of the range, so he was happy with how things turned out.Greenfield also asked about “Arrested Development,” which appeared not to have had the kind of boost to subscriber additions that was expected. Hastings and Wells that bringing in viewers with original content can require multiple series to really lure viewers.

Greenfield noted that there was confusion about the company forecast for margin for the year. Investors had supposed that a statement about margin operating 400 basis points seemed to be a full-year outlook, which would imply underperformance in the fourth quarter. But Hastings said it was a mistake in how the language was posed in the press release. In fact, he said, what the company was talking about was that the Q4 itself will see a year-over-year rise of 400 basis points, not the full year.

Netflix shares continue their decline as the call goes on, currently down $17.52, or almost 7%, at $244.44.

Boorstin asked Hastings about churn of subscribers, which the company doesn’t report. “I don’t even look at subscriber churn. What I really focus on is overall growth, which is really net additions.”

But Greenfield wanted to know why, if households in North America are watching an average of 90 minutes a day, “Why would that household churn at all.” Hastings said there are some households that watch much less, and might be more prone to churn.

Wells was asked about the company’s large spend on content, and he replied that the company “have been very clear that our investment in content will run ahead of our P&L for some time to come.” He noted that a lot of newer details have higher up-front cash outlay.

Said Boorstin, “Some people calculate that disparity between EPS and cash flow at $2 per share. Will we see that affect EPS.”

Greenfield responded by demanding to know what is the actual cash outlay and how does it flow into the cash position.

“We make payment partially upon delivery, and then another section, it depends upon the deal, it could be 18 months. But we’ve put in our letter that depending on our original programming, we may need to seek more capital.”

Hastings said it didn’t seem likely Netflix would need to do a stock sale in the next twelve months. When Boorstin asked about a possible offering in the next two to three years, he said it was too far off.

Hastings said that given increasing “contribution margin” from streaming operations, “I think it’s pretty clear that we have been able to grow revenue faster than investment.” He said the company is “extremely profitable” in its U.S. business “supporting the investment in international,” which is growing revenue fast, but not profitable.

When Greenfield asked Hastings about whether his stock is overvalued, he begged off, saying “Management is probably not the best judge of their stock’s value.” He noted the stock has been “so volatile,” at $80 a year ago. “It’s been a very volatile stock, because we’ve been growing so aggressively. We’re pursuing a business that requires us to put all of our investments into international growth.”

Boorstin asked about the company’s tendency to compare itself to HBO even though HBO owns more of its own content.

“Most original programming originates in this way. You hedge your bets a little bit and step in and do more licensing deals. That’s what HBO did in their earlier days.”

“The more confidence we build, the more we will will take an ownership stake [in original content].”

Asked about competition for licensing and for buying original programming, Hastings emphasized that although prices can go up with competition from Amazon.com (AMZN) and others, he was comfortable with the cost to the company. He also emphasized that the competition for original shows was a “very good thing for content creators,” especially the “revival,” as he called it, of serial television.

The final question was whether the company would do other formats, including movies, talk shows, evening newscasts, etc. Hastings said that while Netflix might not go as far from its roots as, say, HBO, which has live sports programming, nevertheless, “we can have lots of types of content over the next five to six years.”

“We’re fundamentally in the membership happiness business, as opposed to the TV business.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.